My daughter recently opened a pet-grooming and doggy-daycare business, a goal she’s been working toward for years. My wife and I helped her out a bit financially to get started, which we were happy to do. It’s only been a little over a year, but she’s got more business than she knows what to do with, almost all through word of mouth. In fact, she’s had to hire two part-time dog walkers. My worry is this: She doesn’t have health insurance. I actually looked into putting her on our health plan, but she’s 29—too old for us to carry her. The crazy thing is, she took out an insurance policy for her business, so the dogs in her care have more coverage than she does! When I bring this up, she says she just can’t afford insurance right now. I feel like she’s playing Russian roulette.
—Mark, Golden, Colo.
Well, Mark, you’re right to worry. Your daughter is risking not only her health but her business too. Big medical bills are a leading cause of bankruptcy. Yet I often encounter young adults (or, just as often, their parents) who figure they’re healthy and living on a tight budget, and health insurance is just a waste of money. This last bit couldn’t be further from the truth. Not to get morbid, but even healthy people end up in accidents or succumb to serious illnesses. Here are four points to make the next time you talk to your daughter.
- You have to have health insurance. Why? For 2018 at least, it’s required by law. Under the Affordable Care Act (ACA), you’ll have to pay a tax penalty if you don’t have health insurance. (Congress repealed this part of the ACA with its recent tax bill, but this provision doesn’t go into effect until 2019.) But going without insurance could carry a much bigger penalty: medical bills that could wipe her out. Does your daughter really want to risk everything that she’s worked for? Despite the criticism leveled at the ACA, the fact remains that it’s made it easier for people in your daughter’s shoes to get insured. And guess what? Since the ACA was passed, the number of bankruptcy filings has declined by 50 percent.
- You have choices. Fortunately, health insurance isn’t out of reach for self-employed people like your daughter. Colorado is one of more than a dozen states that run their own health insurance exchange where your daughter can shop for plans. At Connect for Health Colorado, she can see if she qualifies for a subsidy that will help her pay her premiums. People who live in states without their own exchanges like this can check out the offerings on the federal exchange, Healthcare.gov. In general, your daughter can buy a new plan only during the enrollment period at the end of each year; in Colorado, open enrollment ended in January. But there’s a list of events that qualify her for an exception, including the birth of a child or a change in marital status. (Note: If she ever takes on full-time employees, she may be able to get a tax credit to offer them health insurance. But that’s a discussion for another day.)
- Shop around for the best price. Your daughter’s first stop should definitely be her state exchange, so she can see if she qualifies for a health insurance credit. If she doesn’t, it’ll be smart to look elsewhere, where she may find a cheaper plan. There are plenty of health insurance companies out there that don’t offer plans on the government exchanges. The easiest way to do this is to get quotes from a comparison site such as eHealth.com, through an insurance agent, or directly from the insurance companies. Your daughter should know that the higher her deductible (the amount she must pay out of pocket before he insurance kicks in), the lower her premium (the amount she pays every month for insurance). If she doesn’t go to the doctor very often, she can choose a high deductible and reap the benefit of lower monthly payments.
- Don’t skip other important insurance. Once your daughter gets health insurance, she should make sure she’s protected in other important ways, too. If she owns a home and has a mortgage, she’s required to have homeowners insurance. Ditto for a car. If she rents, she should view renters insurance as just as mandatory. Contrary to what many people believe, landlords aren’t liable for most damage that happens to their tenants’ stuff. Disability insurance may also be a good idea, since your daughter’s business hinges on her ability to keep up with those canines. She should check to see if she can get a discount by buying her car and her homeowners and renters insurance from the same company—and throw in that business policy you mentioned, too.
For much more about insurance—including a list of the types of policies your daughter doesn’t need—see Chapter 8 of my book Get a Financial Life. With a few key policies in place, your daughter can concentrate on what’s important: keeping those pooches clean and happy.